I’m a newbie investor with £5,000 in Vanguard and their new fees look expensive. Should I move my money?

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I used Vanguard to invest in their Lifestrategy 80 fund. I’ve invested around £5,000 when I started this year, but I love the product and its simplicity.

However, having seen the fee changes written up in This is Money and the introduction of a minimum amount, should I now move my Stocks and Shares Isa elsewhere?

Trading 212 seems good, as does InvestEngine, but I’m not sure which ETF to invest in since Vanguard took care of all this.

Any help on where to start would be greatly appreciated. I typically have a high-risk approach due to the time left until retirement, which I’m primarily saving for. MC, by email

This is Money’s Harvey Dorset responds: Vanguard’s fee restructuring came out of the blue and will no doubt have left many investors, especially those at the beginning of their investment journey, wondering whether it is still the best place for their cash.

The fund manager, which currently charges 0.15 per cent on any balance, capped at £375 a year, told investors last week that it will start charging monthly from January.

The new £4 per month fee will apply to Sipp, Isa and general account holders who have a balance of less than £32,000.

For example, a customer with £20,000 in their account will see their fees increase from £30 per year to £48.

Vanguard said the new rates are necessary to help it “cover the increasing cost of serving our customers.”

Steve Nelson, chief insights officer at LangCat, said: ‘Vanguard’s move is not surprising.

‘Most of the price changes we have seen recently are the result of marginal changes in margins, as opposed to massive changes in rate models.

“Vanguard is clearly protecting profitability levels at the most modest portfolio sizes, which is its right to do.”

«Investors must take into account many factors when comparing the costs of platforms.

“The type of asset it is invested in, the frequency with which it is likely to be traded and the wrappers used are examples that can affect the price, along with the sums invested.”

Despite the changes, for many Vanguard will still be a cheaper option than other platforms, although this largely depends on the amount you have invested.

This is highlighted in our comparison table at the end of the story and you can find more detail in our regularly updated overview of the best stocks and shares Isas and investment platforms.

For someone with around £5,000 invested, Vanguard’s new fees will see you pay £40 more per year for the same service, raising the cost well above many other platforms such as AJ Bell*, Bestinvest*, Hargreaves Lansdown* and of course Commerce 212* and Investment engine*.

However, Vanguard’s service is still cheaper than subscription service Interactive Investor, which costs investors £108 a year, while Fidelity, Halifax and Iweb are also more expensive for those with smaller investment funds.

For those with investments above the £32,000 threshold, meaning they are still subject to a 0.15 per cent fee rather than a monthly payment, Vanguard is a cheap option, although not the cheapest.

With the maximum fee capped at £375 per year, an investor with a fund of £1,000,000 will still pay the same fee as someone with a quarter of that amount, while investors using Hargreaves Lansdown*, Close brothers AM either Charles Stanley Live would pay £3,000, £2,250 and £2,125 respectively.

This means that it is the smaller investors who will lose out as a result of Vanguard’s fee change and may be considering moving their investments elsewhere.

This seems a shame, as it has been a popular place for novice investors, who have been attracted by its low-fee mantra.

Since Vanguard does not plan to introduce fees for withdrawing or transferring your funds from its platform, there is still the option to switch platforms.

But it’s not easy to know where to move your investments, especially from a platform like Vanguard, which only offers Vanguard funds.

They can still be accessed through other platforms, but may come with a higher price.

Meanwhile, Commerce 212* and Investment engine* They are the cheapest options and don’t charge anything to use their DIY services, but they also offer limited options.

These platforms only offer different levels of investment in ETFs and stocks and do not offer access to funds.

Nelson said: ‘Of course, tariffs are only part of the picture. Things like how much help you need choosing investments, your impression and your levels of trust in a brand are some of the many other factors that will drive what is a personal choice based on your own set of circumstances.’

While priced similarly to Vanguard’s new fees, more comprehensive platforms such as Bestinvest and Hargreaves Lansdown also offer a much wider range of funds than Vanguard, as well as stock investments.

This means you are not limited to Vanguard-only funds, although these platforms also offer Vanguard products.

Bestinvest also offers free financial advice sessions.

Investment costs

The table below provides an example of investment costs for someone who owns mutual funds on some of the major platforms and makes 12 ad hoc trades per year.